Will this year’s “consumption revival” disappoint?
Special points to highlight in this issue:
* GDP in the first quarter of 2023 grew a better-than-expected 4.5 percent year on year, or 2.2 percent month on month. While we have almost certainly seen some rebalancing in the month of March, with consumption growing faster than GDP, it is still too early to celebrate the consumption revival.
* China experienced month-on-month CPI deflation in February and March and, in spite of an unexpectedly strong March rebound in exports, imports were still down. None of this suggests an especially brisk revival of domestic demand.
* I am still expecting, however, that GDP growth in 2023 will be closer to 6 percent than to 5 percent, and that much of this will be driven by “high quality” growth (i.e., consumption, exports and business investment). I will continue believing this until we see weak consumption data in April or May.
* Meanwhile Beijing seems to be taking out growth insurance in the form of aggressive local-government borrowing and major infrastructure projects. Credit growth so far this year is already extraordinarily high.
Now read on...
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